Raven Prop P Discussion Threads

[pogue] 24/9/2020 08:32

The point you miss in your rush to quote people is that if you think logically about this if you have deflation the debts of the Western World will bring down the whole system as the government's are spending money like water now they have no hope of ever paying back so eventually, or rather sooner with the current problems, the whole system collapses. I dont rate the chances of anything surviving that crash, apart from gold and tins of beans. If central banks fail to create inflation there is no way to get rid of the debts so everyone is bankrupt. So the logical thing is to bet on inflation you cant win with deflation its just delaying the inevitable. Keep reading vested interests and avoid looking at the big picture Kenny if it keeps you happy.

[kenny] 24/9/2020 00:54

Quite liked these comments about inflation:

Jeffrey Cleveland, senior economist at Payden & Rygel (22 September 2020)

First the world shut down due to the coronavirus. Then heatwaves swept the globe. Hurricanes have slammed into coastal cities. Wildfires are burning across the Western US.
All the while, elections and another wave of the virus loom.
To be specific, it is low inflation that draws the ire of central bankers who desperately want to engineer more of it - for our own good, they assure us.
At the Bank of England, Governor Andrew Bailey pledged to "not hesitate to take all necessary actions" that "ensure inflation is consistent with the 2% target in the medium term."
US Federal Reserve Chair Jerome Powell called low inflation "one of our time's major challenges."
Really? We think low inflation worriers miss the mark wildly on two counts.

Embracing the lows

Firstly, we should welcome low inflation, not fear it. Whenever you hear a central banker talk about the need for inflation, check your pocketbook (or bank balance). For consumers, replace the word "inflation" with the phrase "an annual reduction in my purchasing power" whenever you hear it.
Take the Fed. As part of the central bank's self-imposed rethink of its monetary policy framework, it spent a year and a half "listening" to the public at town hall-style events. While we applaud efforts by central banks to mingle with the masses, we doubt too many Americans were storming the venues pleading for higher prices.
For consumers - many of whom are already struggling with rents, mortgage payments, health, and education bills amid high unemployment - the last thing they want is an inflation-induced reduction in their purchasing power.
Inflation is no friend to investors, either. The best years for asset price performance correspond with low inflation, not high inflation.
According to Deutsche Bank, from 1972 to 1979, inflation in the US averaged around 8% per annum, and real (inflation-adjusted) returns on equity and bonds averaged -2.9% and -3.9%, respectively.
In the UK, the same period also saw high inflation and similarly lacklustre real equity and bond returns of -5.5% and -6.1%, respectively.
Before and after the 1970s, inflation was low to moderate, and both equities and bonds exhibited positive performance.
In fact, in the "low inflation" period between 1980 and today, we have seen real annual returns of about 7%-8% in US and UK equities and 5% in US and UK bonds. Not a bad time for investors.

The 'FAIT' accompli

Secondly, what makes central bankers think they can alter the low inflation trend?
As mentioned above, after a much-ballyhooed year and a half rethink, the Fed announced it would transition to a flexible average inflation targeting strategy.
A mouthful, to be sure, so Fed board member Lael Brainar advised: "We call it FAIT."
The gist of this is that the Fed pledges not to flinch should inflation top 2%, allowing for average inflation to "catch up" after periods of low inflation.
We say all well and good, but US inflation has trailed 2% since the Fed officially emblazoned the target in a statement in 2012, and the level of prices is now a full five percentage points below where it would have ended up had the central bank's aim been accurate.
Neither verbal nor written announcements appear to have much effect on prices.
Now, you might be thinking 'Wait, central banks are doing way more than just talking about higher inflation this time around'.
They have been conducting asset purchases on a scale unseen in economic history. Meanwhile, their fiscal counterparts are on borrowing binges.
Suffice to say asset purchases have been a staple of global central bank policy for more than a decade now, with vanishingly little to show for it when it comes to inflation.
And the fiscal borrowing spree? New debt issuance is not in and of itself inflationary.
More debt only means the government has offset the hole in consumer incomes due to the pandemic shutdowns. If Japan's experience provides any lessons, it is that a high debt-to-GDP ratio fails to stoke inflation.
Further, a simple disaggregation of the most popular inflation index, personal consumption expenditures, portrays the issue (see graph above).

At your service? Not yet

What has been holding prices down? Not service prices.
While the cost of services - think everything from haircuts to healthcare - has been rising at a steady, 3% clip, durable goods prices have been deflating for two decades, depressing the overall rate of inflation.
Again, better goods at lower prices hardly seem like the economic calamity central bankers urgently need to confront.
In short, while a central bank's goal to boost inflation to a 2% average over time might seem somewhat misguided, we are sceptical they will be able to manufacture the inflation they so desperately desire - no need to lose sleep over it just yet.

As such, for investors, calls of "the end of the bond bull market" may once again prove premature.

[garycook] 23/9/2020 11:32

To Kenny or anyone holding RAVP,what is bid/selling price atm.I know the offer/buying price is 125.45p ?

[igbertsponk] 21/9/2020 09:09

Massive drop... somewhat less than the rest of the market! Safe as dachas.

[montyhedge] 18/9/2020 15:57

2nd Oct dividend cheque on the doormat, nice.

[kenny] 18/9/2020 01:36

According to Thursday's MPC meeting the BoE is looking in to negative interest rates for the UK. Some commentary below about Thursday's revelation:
=============================================================================
Financial markets - already pricing a move into negative territory by the MPC as economic prospects darken - are forecasting a cut to minus 0.1pc by mid-2021.

JP Morgan economist Allan Monks said: "The BoE is serious about negative rates. The more it talks about this option the more it looks as if it has all but made up its mind."
=============================================================================

Also this week the Fed stated that interest rates will likely be "anchored near zero" until at least 2024.

I think very low interest rates may stay for a long time beyond 2024. I also think a bout of deflation could develop.

[garycook] 17/9/2020 04:25

Kenny & eeza, Thanks

[kenny] 16/9/2020 15:05

Hi Gary, the next ex-div is the 12th Nov.

[eeza] 16/9/2020 14:33

@Garycook

XD is always a Thursday (except for a few overseas tickers).
So will be either 12th or 19th Nov.

[zangdook] 16/9/2020 14:22

They said
Our market is stabilising but we think it prudent that in relation to 2020 we will announce one distribution at the time of the issue of our annual results.

I didn't see anything about years after 2020, or about the level of future distributions, but I suppose Edison need to make assumptions in order to write their note.

[garycook] 16/9/2020 14:20

Kenny,Next XD date for RAVP would be around or on Friday 13 November correct ?

[kenny] 16/9/2020 13:57

zandook, just to clarify:

You are correct but in the recent results the company stated that they will now change to one buy-back per annum on the ordinary. Subsequently, Edison projections show a reduced dividend of 2.25p per annum for each year they forecast. Therefore, David Stevenson is correct.

In any event the actual yield on the ordinaries is very low - for the reason that the yield the company and others quote, does not take account of the fact the majority of the "dividend" on the ordinaries represents a return of capital. Hence, I have always preferred RAVP.

[zangdook] 16/9/2020 12:19

I think he's mistaken about the ords yield, which undermines his preference for the prefs:

and the shares are yielding 7.6% at 30p

RAV usually does two tenders a year, but he's only counting the 2.25p/share from the upcoming tender.

[pogue] 16/9/2020 12:09

The article is for RAV not RAVP, does not mention the prefs.

[stonesfan] 16/9/2020 11:48

DS writes in Money Week and, imv, is one of the most astute commentators around.

[kenny] 16/9/2020 09:38

RAVP tipped by David Stevenson today:

"The preference shares (RAVP) yield is c 10% – that is I think an even more interesting bet all things considered."

[igbertsponk] 10/9/2020 14:06

They are though very illiquid and hard to snaffle.

[pogue] 10/9/2020 14:05

Fortunately sold my RAVCs just before the crash at £1.03 when I was clearing the decks for the storm.
Was thinking there maybe an arbitrage there at some point when the conversion was announced.

[igbertsponk] 10/9/2020 11:46

Any buyers might like to know that you can instead buy RAVC shares and it works out cheaper as they convert at end of month. Nice arbitrage opportunity I've been working as long as you don't mind getting some Ords too.

[kenny] 10/9/2020 10:49

I am not a holder of ordinary shares, therefore not entitled to participate in the AGM.

[gfrae] 10/9/2020 09:59

Kenny, presumably you could ask them that question at the upcoming AGM ?

[zangdook] 10/9/2020 05:07

Technically, it hasn't been paying dividends on the ordinaries, it's been repurchasing tendered shares. Whether the supply of cash to pay for that or for the pref dividends is affected, or whether it increases the tax burden on the company, I don't know, but the well-being of the company matters to all shareholders.